The USD/JPY pair continues to build on a rebound from its recent low of 148.65, its lowest point since October 11. On Wednesday, the pair extends its gains throughout the European session, reaching a fresh daily high of around 150.55 in the final hour.
Investors appear increasingly confident that the Federal Reserve will take a more cautious stance on rate cuts, fueled by expectations that U.S. President-elect Donald Trump’s policies could drive inflation higher. This sentiment has contributed to a rise in U.S. Treasury bond yields, encouraging capital flows away from the lower-yielding Japanese Yen (JPY). Simultaneously, the expectation of a less dovish Fed supports the U.S. Dollar (USD), providing additional strength to the USD/JPY pair.
Despite the positive momentum, USD bulls are cautious, waiting for further direction from Federal Reserve Chair Jerome Powell’s upcoming speech, which could provide more insight into the central bank‘s rate-cut plans. Additionally, last week’s release of Japan’s November Consumer Price Index (CPI) suggested a pick-up in underlying inflation, which has sparked speculation that the Bank of Japan (BoJ) may raise interest rates in December. This development may help temper further gains for the USD/JPY pair.
Looking ahead, traders are awaiting the release of the U.S. ADP report on private-sector employment, which could provide further momentum ahead of the U.S. ISM Services PMI. However, all eyes will remain on Friday’s Nonfarm Payrolls (NFP) report, as it will offer critical insight into the health of the labor market and influence the Fed’s upcoming decisions. The NFP report will play a pivotal role in driving demand for the USD and shaping the USD/JPY pair’s near-term trajectory, especially as market participants prepare for the FOMC and BoJ policy meetings in two weeks.
Related Topics:
